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What is taxable income and how is it determined?

Taxable income is calculated by starting with gross income, subtracting excluded income and exemptions (removed in 2018), and subtracting allowable deductions. In determining what items of income and deductions should be taken into account for any taxable year, the taxpayer’s method of accounting must be taken into account. For almost all individuals, that method is the cash receipts and disbursement method. In other words, income has to be received and deductions have to be spent. Some business activities can use other methods of accounting, and if you think that might apply to you, consult with a tax adviser or accountant.

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What taxes are deductible on a federal income tax return?

There are several kinds of taxes that are deductible, but not all deductions are available for all taxpayers. Most tax deductions are available only on Form 1040. State and local income taxes (or if you elect instead, sales tax), real estate taxes and personal property taxes are deductible if you are able to itemize, on Schedule A.

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Teens and Summer Employment: Tax Breaks Can Save Precious Money

Summer is here and the economy continues to be on nearly everyone’s mind. Unemployment numbers are not pretty, especially for teens and students who used to rely on summer jobs to pick up some cash for school and savings. But for teens lucky enough to find a summer job, or for parents trying to think creatively about how they can translate their needs into summer work for their children, paying attention to some of the tax breaks for young people offered by the IRS can make a big difference next April, and even possibly inspire some new ideas about summer jobs that might be advantageous to both employee and employer.

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Are there other income tax deductions?

Yes, there are other income tax deductions. Examples include depreciation, net operating loss carryovers, start-up expenses, and many others. You should consult you tax advisor to see whether the foregoing, or any other deductions, are applicable in any given income tax situation.

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What falls within the classification of expenses?

This type of expenses deduction includes most expenses in connection with rental property or investment property, such as investment advisory fees, maintenance expenses and repairs of rental real property, and any other ordinary and necessary expense incurred to produce income or to manage, conserve or maintain income-producing property.

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What medical expenses are tax deductible?

Medical expenses are tax deductible only to the extent that they exceed 7.5% of the taxpayer’s adjusted gross income and are not compensated for by insurance or otherwise. According to the IRS, tax deductible medical expenses may include everything from fees paid to doctors to transportation costs essential to medical care.

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